“Other stocks that investment pros are keeping their eyes on? One is McKesson (MCK), the largest U.S. drug distributor, which has fallen more than 20% since late November. McKesson's business isn't impacted as much as some others in an economic downturn, and its profit is expected to rise 16% in the next year. When the economy stabilizes, some analysts say McKesson could be an acquisition target.”

McKesson’s closing price was $52.05 yesterday, which is more than double the October 2004 low of about $24 per share but 10% below the closing price on the date that the October WSJ article ran.

I still view McKesson as the most logical LBO target among the Big 3 wholesalers, especially given its business mix, current operating platform, age (and stability) of its management team, and potential for a value-creating restructuring. However, the turmoil in the credit markets makes a near-term deal seem unlikely as the credit crunch grips private equity.

Luckily, Mr. Hammergren can rely on his book royalties to tide him over until the private equity firms can get back on their feet.

1 comment:

An eagle-eyed reader just sent me a link to Jim Cramer's negative comments on drug wholesalers from his TV show last night:

"Amerisourcebergen (ABC): “That is a wholesaler of pharma…I think drug stocks are vastly oversold…that is a good company…but the whole industry is doing so badly. Let’s keep an eye on those stocks. Don’t buy.”"

DISCLAIMERThe analyses on this website are based on information and data that are in the public domain. Any conclusions, findings, opinions, or recommendations are based on our own experienced and professional judgment and interpretations given the information available. While all information is believed to be reliable at the time of writing, the information provided here is for reference use only and does not constitute the rendering of legal, financial, commercial, or other professional advice by Pembroke Consulting, Inc. or the author. Any reliance upon the information is at your own risk, and Pembroke Consulting, Inc. and the author shall not be responsible for any liability arising from or related to the use or accuracy of the information in any way. Pembroke Consulting, Inc. does not make investment recommendations, on this website or otherwise. Nothing on this website should be interpreted as an opinion by Pembroke Consulting, Inc. or the author on the investment prospects of specific companies.

The comments contained on this site come from members of the public and do not necessarily reflect the views of Pembroke Consulting or the author. Neither Pembroke Consulting nor the author endorse or approve of their content. Pembroke Consulting and the author reserve the right to remove or block comments, but are under no obligation to explain individual moderation decisions.

The public domain use of our materials includes linking to our website. You do not need to obtain special permission to link to the Drug Channels site.

The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., or any of its employees.